Consulting? or Appraising?

[Terrel L. Shields]

Hypothetical

If you are asked to determine what the market outlook is for a portfolio of 20 new unsold houses and 10 vacant lots as a consultation and the client has a list of properties which have A - been listed and on the market for over one year; and B - has a more recent CMA/BPO for each property performed by a new listing Realtor, will you have to comply with Std 1 and 2?

And the client is in a cash flow crunch and doesn't want to pay for you to appraise the properties per se. In other words, the client has a pretty good handle on the retail price of each and wants you to tell them

A - how LONG will the properties take to tell (be absorbed) in the market, and

B - Vet how 'salable' each property is and why. (Location, competition, etc.)

Since you have a valuation (CMA) from a third party, would you comply with Std 1, 2 or simply 'do' the 4,5 thing?

 

[Howard Klahr]

I believe the answer to your questions A and B are a consulting assignment. However, in order to use the CMA prepared by another you would need to provide a statement that you have no reason to doubt its reliability.

Standards Rule 2-3, Standards Rule 3-3, Standards Rule 5-3, Standards Rule 6-9, Standards Rule 8-3, and Standards Rule 10-3: Edits were made to remove the requirement that the signing appraiser have a reasonable basis to believe that work done by others was credible. Language was added clarifying that the signing appraiser(s) must not rely on the work of others if that appraiser has a reason to doubt that the work is credible.

When a signing appraiser(s) has relied on work done by appraisers and others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work. The signing appraiser(s) is required to have a reasonable basis for believing that those individuals performing the work are competent. The signing appraiser(s) also must have no reason to doubt that the work of those individuals is credible.

It does not seem too unlike a ,marketability report for a proposed development whereby research is performed to evaluate market acceptance, pricing and terms.

 

[Terrel L. Shields]

Edits were made to remove the requirement that the signing appraiser have a reasonable basis to believe that work done by others was credible. Language was added clarifying that the signing appraiser(s) must not rely on the work of others if that appraiser has a reason to doubt that the work is credible.

I wonder why the affirmative requirement was replaced with a requirement that the appraiser not use info they suspect to be not credible...

 

[Howard Klahr]

I believe it had to do with the need to rely upon reports prepared by others outside of the appraiser's expertise. Therefore, to state an affirmative would possibly extend the appraiser beyond their competency.

 

[Vernon Martin]

I'm not even certain if that would be a consulting assignment governed my USPAP. Realtors would have no qualms about taking on such an assignment, and how many of them read USPAP?

From a practical standpoint, this type of question is best directed to your home state licensing agency. We all fear the USPAP police, but when you think about it, as appraisers in different states, we are each regulated by different agencies and are subject to enforcement by different USPAP police. I don't know how Arkansas is, but if I was offered an assignment like this in California, I would tailor the analysis and report to the client's needs without worrying what the USPAP police are going to think. They have much bigger fish to fry in this state.

Based on other posts here, there seem to be some states where the licensing agencies go on USPAP witch hunts. How does Arkansas work?

 

[PropertyEconomics]

Vernon .. I believe if an appraiser takes on this assignment they would have to adhere to USPAP because USPAP governs appraisers. No matter what a Realtor may do, we are simply under different rules. One applies to us that doesnt apply to them. I believe if the appraiser was hired because he is an appraiser, USPAP applies, or at least it would in my state.

 

[Vernon Martin]

Vernon .. I believe if an appraiser takes on this assignment they would have to adhere to USPAP because USPAP governs appraisers. No matter what a Realtor may do, we are simply under different rules. One applies to us that doesnt apply to them. I believe if the appraiser was hired because he is an appraiser, USPAP applies, or at least it would in my state.

PE, I always respect your opinion, but I would hate to see appraisers forfeit work to other professions because of the mistaken belief that USPAP would prevent them from taking on honest, legitimate work responsive to a client's needs.

I am a certified fraud examiner, statistician, certified general appraiser and college instructor. When my clients contact me, it's not because I'm an appraiser but because I've helped them before. Some of my competitors are "realty advisors" who are not even licensed. I think appraisers limit themselves when they start defining themselves
only as appraisers.

I have reason to believe that New Mexico is stricter than California in these matters.

 

[PropertyEconomics]

PE, I always respect your opinion, but I would hate to see appraisers forfeit work to other professions because of the mistaken belief that USPAP would prevent them from taking on honest, legitimate work responsive to a client's needs.

I am a certified fraud examiner, statistician, certified general appraiser and college instructor. When my clients contact me, it's not because I'm an appraiser but because I've helped them before. Some of my competitors are "realty advisors" who are not even licensed. I think appraisers limit themselves when they start defining themselves
only as appraisers.

I have reason to believe that New Mexico is stricter than California in these matters.

Vernon .. I dont think you and I are in disagreement. I would not hesitate to take the job offered in this thread ... I am merely pointing out that it should be done in compliance with USPAP as a consulting assignment.
Frankly I dont see any reason the consultant cant make an extraordinary assumption the values provided by the client are correct for purposes of analysis and are the basis for the projections. In my mind this is much more about "investment value" than it is about "market value" and the "investor" has said assume these values and tell me how long it would take to sell ... I think its a valid assignment and a good one at that. I would just make my report compliant with USPAP regarding consulting.
As with all assignments the scope of work and the explainations in this report would be very very important ... but I think its a good job.

And yes I think its safe to say NM is stricter than CA in these matters. USPAP IS NM law ... it is incorporated into our law and there are no exceptions for adherence to it if one acts as an appraiser in any capacity regarding real estate and real estate valuation.

 

[JSmith43]

A - how LONG will the properties take to tell (be absorbed) in the market, and

Terrel: Assuming that isn't a trick question, after proper development, I'd illustrate the opinion with a graph of price points on one axis and est. DOM on the other. Also, I would adorn the graph page with an illustration of Merlin in front of a crystal ball.

 

[George Hatch]

I would ask what burdens compliance with USPAP puts on the individual that they wouldn't already normally do when performing any of the services that fall under the broad category of appraisal practice? Aside from doing dishonest work, I have yet to see how compliance with USPAP really puts an appraiser at a disadvantage in the marketplace.

All I do hear about is how appraisers think these "outsiders" aren't accountable for their work.

Perhaps someone can explain to me the value of calling yourself a professional on one hand, but considering yourself professionally unaccountable for your actions on the other. Personally, I don't see how that dynamic works. If your clients don't care what they get then what difference does it make what you call your role or your service?